SPY Trends and Influencers June 7, 2014

A weekly excerpt from the Macro Review analysis sent to subscribers on 10 markets and two timeframes.

Last week’s review of the macro market indicators suggested, as May ended and June began that the equity markets looked very bullish. Elsewhere looked for Gold ($GLD) to continue lower while Crude Oil ($USO) had an upward bias. The US Dollar Index ($UUP) was biased to pullback in the uptrend while US Treasuries ($TLT) might consolidate or pullback in their stronger uptrend. The Shanghai Composite ($SSEC) looked headed lower again while Emerging Markets ($EEM) were pulling back in the uptrend. Volatility ($VIX) looked to remain subdued and biased to the downside keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts showed the SPY and QQQ in good uptrends while the IWM was consolidating with an upward bias. It had the best potential. Gold moving lower and the potential for the Dollar to pullback and maybe Treasuries as well, was a better scenario for equities.

I added a caution that the Dollar, Treasuries and Oil moving higher would cause many to raise caution on equities as they do not all move together in theory. But they can advance for long period before any change. Stick to what the price action is saying.

The week played out with Gold pushing lower before rebounding to end the week near unchanged while Crude Oil consolidated the pullback. The US Dollar tested overhead resistance but failed to hold it while Treasuries pulled back to support. The Shanghai Composite muddled along sideways while Emerging Markets found support and moved back higher. Volatility made a new 7 year low as it continued lower. The Equity Index ETF’s halted started the week flat to down but quickly reversed and ended near the highs, with the SPY at all time highs, the QQQ at 13 year highs and the IWM finally moving back up. What does this mean for the coming week? Lets look at some charts.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

The SPY started the week consolidating the move from last week before taking off higher to finish at new all-time highs. The Friday candle can be viewed in the context of the trend higher as strong ending with virtually no upper shadow, but the gap also raises the potential for an Evening Star reversal pattern should it confirm lower on Monday. The RSI on the daily chart has moved into technically overbought territory but only marginally and the MACD is rising and near prior highs. On the weekly chart the longer candle is accelerating the move higher. The RSI is rising and at that technically overbought level with a MACD that is rising after just crossing up. It looks much stronger on the weekly chart. There is no resistance higher but a target on a Measured Move to 197.30-197.40. Support lower may be found at 193 and 190.42 followed by 188.90. Continued Upward Price Action.

Heading into the first full week of June the Equity markets had a good week but may need a pause or pullback before continuing, as they are overbought on some measures. Elsewhere look for Gold to consolidate with a downward bias while Crude Oil consolidates with an upward bias. The US Dollar Index seems content to move sideways on the long term consolidation but with a short term upward bias while US Treasuries are biased lower in the short term. The Shanghai Composite looks to be stuck in a rut, moving sideways, and Emerging Markets are biased to the upside. Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, despite the moves higher, although the VIX is near historic lows. The Equity Index charts themselves all look good for more upside, but are becoming overbought on the shorter timeframe. On the weekly charts they look strong, so perhaps some sideways or a pullback before more upside. Of course they can just keep rising and get more overbought short term. Use this information as you prepare for the coming week and trad’em well.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)

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